Jin Liqun, chairman of the board of supervisors of Chinese sovereign wealth fund China Investment Corporation (CIC), has said Chinese GPs need to move beyond the pre-IPO strategy.
Speaking on a panel at the 2010 Global Private Equity Beijing Forum, organised by the Beijing Private Equity Association, Jin said: “The pre-IPO investment market is very crowded. How many companies are there waiting to go public? But not everyone has the opportunity. So I think GPs should think of new ways to satisfy LPs’ high expectations.”
Jin went on to say that the large amounts of capital flowing into Chinese private equity from abroad, in addition to the inflows from China’s accumulated wealth, meant GPs were feeling pressure in deploying the money.
“For GPs, although it’s not hard to raise money, it’s not easy to find good deals,” Jin said, adding: “As an LP, we look for performance.”
However, he stressed, intense competition doesn’t mean there are no good deals left – the market is “challenging yet promising”. If GPs take a different route to pre-IPO investments and are more tolerant for a longer investment period, making private equity investments will be easier, Jin said.
On the question of whether the larger inflows of capital would ultimately mean a growth in the number of GPs in the industry, Jin was ambivalent.
“Established and experienced GPs will be able to find good deals and become larger,” he said. “On the other hand, it’s not easy for smaller GPs to survive. So I think it depends on GPs’ talent – you need to understand the market, the development of various industries, and management teams of the companies.”
The $300 billion CIC recently set up a wholly owned subsidiary in Hong Kong, CIC International (Hong Kong) Co, to expand its overseas investment. Lawrence J. Lau, former principal of The Chinese University of Hong Kong, was appointed as the chairman of the Hong Kong subsidiary.